Arthur Hayes Warns Of ‘Great Depression-Style’ Bear Market From Credit Cycle Reversal

• Hayes stated that rising liquidity driven by deregulation and lending growth has been a key driver of asset prices.
• He expects the market peak to coincide with maximum confidence in continued credit expansion.
• According to him, the potential downturn could be a ‘Great Depression-style’ bear market.

Arthur Hayes, BitMEX founder and chief investment officer at Maelstrom, said this week that the current cycle of global credit expansion could trigger a severe ‘Great Depression-style’ bear market.

Hayes stated the current macro environment is being driven by rising liquidity tied to banking deregulation and increased lending capacity. According to him, once those forces reverse sharply, the market will crash.

“I think at some point there's going to be a reaction against all this money printing,” Hayes said in a podcast with Altcoin Daily. “Maybe it'll be a war. Maybe it'll be some sort of social strife. I don't know what it'll be.”

‘Great Depression-Style’ Bear Market Risk

According to Hayes, when the question of whether “the politicians” are going to support the continuous expansion of credit is at its peak, it will most likely mark the market top before it comes crashing down. 

“Whenever that is, and I think that the bear market is going to be like a Great Depression style bear market, very, very, very, very big, difficult, painful,” Hayes said. “I think that is going to be a very key inflection point to get right.”

The S&P 500 was relatively unchanged on Wednesday, while oil prices rose amid a U.S. blockade of Iranian ports. Market watchers are also waiting on what could be Jerome Powell’s final policy meeting as Federal Reserve chair, as well as quarterly earnings from four of the “Magnificent Seven” after market close.

The SPDR S&P 500 ETF Trust (SPY) edged 0.2% higher in morning trade. On Stocktwits, retail sentiment around SPY trended in ‘bullish’ territory over the past day, while chatter fell to ‘low’ from ‘normal’ levels. 

The SPDR Dow Jones Industrial Average ETF (DIA) slipped 0.42%, while the Nasdaq-100 tracking Invesco QQQ Trust (QQQ) moved 0.48% higher. 

Meanwhile, Bitcoin (BTC) moved 1% higher in the last 24 hours to around $76,500. Retail sentiment around the apex cryptocurrency on Stocktwits dipped to ‘neutral’ from ‘bullish’ territory over the past day, accompanied by chatter at ‘normal’ levels. 

Read also: EXCLUSIVE: LendingClub CEO Explains Why Happen Bank Rebrand Puts Company In SoFi’s Lane

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